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Sure, Timothy Geithner led the negotiations with AIG counterparties when he headed the New York Fed last year, but TARP special inspector Neil Barofsky’s audit is damning where it really hurts the Fed. It raises the question of whether the central bank is a tough enough regulator at a time when Senator Christopher Dodd is calling for the Fed to be stripped of such power over big banks.
Big Picture has posted the report in its entirety.
It’s one thing to be a bad regulator during the boom years when, let’s face it, there were bad regulators everywhere. But to shrink from tough negotiations with banks during the height of the crisis when those banks were already benefiting from billion of dollars in state aid will be harder to explain away, though the New York Fed has tried.
From the report:
FRBNY’s decision to treat all counterparties equally (which FRBNY officials described as a “core value” of their organization), for example gave each of the major counterparties (including the French banks) effective veto power over the possibility of a concession from any other party…
It also arguably did not account for significant differences among counterparties, including that some of them had received very substantial benefits from FRBNY and other Government agencies through various other bailout programs (including billions of dollars of taxpayer funds through TARP), a benefit not available to some of the other counterparties (including French banks)…